Satellite funding to launch NewSat rally

Shareholders didn’t take too kindly to satellite company
NewSat
’s suspension of trade for three months over the new year. The stock started trading again on February 25 at 20 per cent below its closing price in November, and its shares have since dropped a further 25 per cent to 33.5¢ in mid-March.

That said, the company resumed trading with good news; it had finally secured the full $611 million in funding needed to build and launch the Jabiru-1 satellite, which it claims will be one of the largest of its kind.

The satellite uses the same type of frequencies planned for parts of the federal government’s national broadband network and will give companies in the resources, construction and government access to high-speed communications from remote locations.

Through a mix of equity and mezzanine funding managed by Credit Suisse Australia and Baillieu Holst, and re­financed debt elsewhere, the company now has the financial backing to fulfil its plans.

Delays gaining that funding, however, set back the launch of the satellite some three years – a delay unlikely to prove healthy for sales.

NewSat remains confident, though, as the sales pipeline for companies set to use the satellite sat at $US454 million in February. That pipeline is likely to exceed the build cost in the near future and over its 15-year lifetime, NewSat says Jabiru-1 could generate up to $US3.3 billion.

Baillieu Holst analyst Nick Caley has placed a “buy" tag on NewSat shares with a price target of 75¢, noting the funding completion had lifted some of the risk over the stock.

The company has reported significant growth in other areas, too. Revenue rose 19 per cent in the first half of 2012-13. Earnings before interest, tax, depreciation and amortisation rose 66 per cent from the same half a year earlier. The company reported a net profit of $1.3 million for the six months.

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Oddly enough for a company focused on space, much of these revenues came from work being done on the ground. Its teleport business – the swathes of antennae that communicate with satellites and make the vital connection with Earth, won $US12.45 million in contracts over the six months.

Though many of its recent contracts have boosted NewSat’s business outside Australia, its plans to launch a satellite specifically serving local industry could mean a return for competitive growth in the near future.